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Tuesday, August 5, 2014

Today Cedar Fair released their earnings results for the second quarter of 2014, and gave some information on the results through August 3rd.

Overall the company is having another strong year, with some small attendance declines and revenues generally on pace with last year. Operating costs went up due to several factors, many of which were planned by the company, and combined with the slight attendance decrease the EBITDA total was down 2%. In park per capita spending was up 4%, which has helped keep the revenues steady for the year.

I was anxious to see the company's attendance figures, since we recently saw Six Flags post a 1.1 million decrease in attendance. Through August 3rd Cedar Fair reports a 273,000 decrease in attendance. Still not "good" results, but certainly not what Six Flags is experiencing.

Here's some notes from the conference call that was held today:

• The quarter was indeed impacted by two events outside the company's control: the flooding of Valleyfair which affected the park for about a week, and a water main break that closed Cedar Point for a weekend. Some proceeds from a business interruption insurance claim will offset some losses, but the company sees the events as immaterial overall.

• The harsh winter that Six Flags pointed as a blame for bad results (my words, not Cedar Fair's) was commented on during the call. Cedar Fair had an opposite take on the winter, saying that "we are not able to credibly quantify an attendance impact at this point." They said some effects from the winter probably took place, but were offset by other factors and thus not significant enough to stand out.

• Cedar Fair's current view on weather is that it usually equals out over the course of a whole season, so that they don't really blame results on bad weather. They did specifically say that this year when the parks have nice, sunny days that attendance is at or above expected levels.

• This year the company is actually seeing a decrease in the total number of season passes sold, but will have a record year with them in terms of revenue (higher cost per pass). They're also seeing season pass holders visiting more frequently.

• Revenue from outside the parks are down slightly this year, and occupancy levels are "soft." That actually makes them more confident in their decision to spend a significant amount to totally redo the Hotel Breakers at Cedar Point, to bring the quality level up to expectations.

• Group Sales are ahead of last year right now in terms of attendance and revenue, very promising trends. They're taking a long-term investment approach into their Sales programs, including new staff, programs like Run and Ride, and new catering facilities at the parks.

• Improved food offerings are the primary increase in in-park spending so far. The company is working on new offers like value meals to get better capture rates. Also trying out new concepts like Harmony Hall at Carowinds, and next year will roll out a season-long dining pass for season pass holders at all parks - this year was the trial for that at one park and it was a hit.

• Items that increased operating costs included fixing up unexpected messes from that extra bad winter, adding more free midway entertainment at the parks and giving free admission to Dinosaurs Alive to season pass holders.

• This year's capital expansions are being well received so far. Mr. Ouimet even pointed out that the company's "strategy of investing in the largest coasters in the industry still proves to be value enhancing." Good new for coaster fans! Banshee at Kings Island has the park on track for record season.

• The company has partnered with Time Warner Cable to sell advertising on the new FunTV network. They're seeing a lot of interest, but are going to limit the amount of ads on the TVs so they still make meaningful revenue but do not detract from the guest experience.

• One question asked of the leadership team was if they would look to partner in parks overseas, and while not stated I'm sure the comparison was being drawn to recent Six Flags announcements. Mr. Ouimet replied that you have to be careful not to have management be distracted by projects along those lines that bring in a small amount of revenue - so that's a big fat no.

• New cabins were added to several parks in 2014, and they're seeing these grow in popularity quickly. The company is now looking to introduce these at other properties in the future. Can't wait to see what parks add them!

• Mr. Ouimet confirmed the creation of another 4-D interactive ride. Commenting on Wonder Mountain's Guardian he said that the company's entry into the "digital
interactive arena has proven successful," and that they will "continue to build on
lessons learned and technology advances in the instillation of our next 4-D
dark ride." Just a hunch, but I would expect to see that already in 2015!

• Two times during the call Mr. Ouimet stated that there will be a "marketing relaunch of Carowinds" next year - it sounds like their push for the park will be even bigger than the expected "record breaking attraction" to be announced in a couple weeks. Chain-wide, he also said that "several new rides and attractions will be announced in the coming weeks."

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